On Friday, April 29, at the start of the London session, DXY is experiencing some selling. The index is trading at 102.99 at the time of writing.
- On Friday, the dollar lowered 0.6% after snapping a four-day winning streak against all G10 currencies.
- Risk drivers, a hawkish Fed, and good US GDP data keep buyers optimistic.
- Later in the North American session, US Inflation PCE will take center stage.
DXY fundamental forecast
The greenback is experiencing a corrective decline and is expected to return to the 103.00 area by the end of the week.
The see-saw
During Friday’s Asian session, the DXY deepens its decline from a 20-year high to 103.50. As a result, the dollar index consolidates positive traction in the absence of bond swings and a cautious mood ahead of the Fed’s favored inflation gauge.
The DXY soared for the sixth day to a multi-year high on Thursday, despite Q1 2022 US GDP falling to -1.4% from 6.9% previously, below the 1.1% anticipated.
What are the Feds cooking?
Markets predict the Fed to raise interest rates by 150 basis points over the next three meetings, substantially surpassing other foreign central banks. Those expectations were not dashed by Thursday’s statistics indicating that the US economy shrank in the first quarter of 2022, even though the results highlighted the threats to growth faced by tighter monetary policy.
Meanwhile, the dollar remains strongly supported by expectations of a stricter normalization of the Fed’s monetary conditions, which is likely, to begin with, a 50 basis point rate rise on May 4.
What in the world?
POTUS Joe Biden requested $33 billion from Congress Monday to aid Ukraine with weapons, equipment, and food. In other developments, China has implemented lockdown measures in its two largest cities, Beijing and Shanghai – the twin engines that drive most of its economy – in an unwavering effort to eradicate Covid-19 breakouts.
It’s worth mentioning that the US Dollar Index’s gain is boosted by safe-haven demand amid the Russia-Ukraine conflict and China’s Covid concerns.
Key data releases from the US
Today, we have inflation figures, followed by Personal Income/Spending and the final Consumer Sentiment for April.
What’s next?
The Fed’s more aggressive rate path remains the major mover behind the dollar’s sturdy bullish position, which looks to be supported by the current rising inflation story and the labor market’s solid health.
DXY technical analysis: dipping below 102
During the early London session, DXY is trading below the 102-level. So far, the index has lost 0.6%. At the time of writing, the DXY is trading at 102.92. The index is way above its 100-day MA on the daily chart, and the RSI is near the 70 level.
A break above 104.09 would open the door to 104.52. If it can cross that level, we’ll see the index touching 105.09. On the flip side, the next support for the index lies around 102.52. If the index slips below this level, we can see a downward movement towards the 102.1 level.
